Motor Claims - A challenge for the industry · or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of

Motor ClaimsA challenge for the industryDr. Nicola Rautmann / Stefan Speer, 15.02.2017, Reinsurance EMEA

Dr. Nicola Rautmann / Stefan Speer | 15.02.2017 | Reinsurance EMEA 2

Longevity of Claims

Bodily Injuries

Claims Heads

Dr. Nicola Rautmann / Stefan Speer | 15.02.2017 | Reinsurance EMEA

Bodily Injury Claim

Loss of earnings

Assistance

Pain and Suffering

3


Yield

Reserving

Inflation


Bodily Injury ClaimsA key driver of Motor Insurance Results

5


Swiss Re Benchmarking of Bodily Injury throughoutEurope

Started in the late 1990s

2015: 16 EU countries covered

2017: extended to 19 countries

Standardized comparable approach


ItalyPast – Present – Future

7


Tetraplegia Claims Scenario - Italy

8

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

Loss of Earnings Assistance Pain & Suffering Remainder

2000: +51%

2010: +106%

2015: +116%

2025: +168%

Development from1990 to:


Bodily Injury Landscape

Observed developments in the recent years

9


The model approach

10

Parameter:

30-year-old man

wife without own income, 2 children (aged 2 and 5)

average income from dependent employment

defined injury: tetraplegic without artificial ventilation

defined assistance level: 100% disabled, no return to work, highest level of assistance

a hypothetical victim Tetraplegic


Recent survey &Response rate


Total claim costs in Europe as per 2010Tetraplegia claims scenario, Disability Factor 100 %

12

0 5.000.000 10.000.000 15.000.000

Poland

Spain

Italy

Czech Republic

Finland

Belgium

Switzerland

Austria

Germany

France

UK

Loss of earnings Assistance Pain and suffering remainder

€ 0,6m



13

0 5.000.000 10.000.000 15.000.000

Poland

Slovakia

Spain

Finland

Italy

Czech Republic

Switzerland

Austria

Belgium

Germany

France

UK

loss of earnings assistance pain and suffering remainder

€ 0,7m



- 5.000.000 10.000.000 15.000.000

Denmark

Slovakia

Hungary

Sweden

Poland

Spain

Netherlands

Czech Republic

Finland

Italy

Austria

Belgium

France

Germany

Switzerland

UK

Loss of Earnings Assistance / Care, incl. medical treatment costs Pain and Suffering Remainder

€ 0,9m

from € 5,0m to € 9,4m – in 5 Years


• Non-Moral damages

– Medical costs (medical treatment, rehabilitation)

– Loss of earnings

– Care cost and assistance

– Additional needs (prosthesis, wheelchair, modifications to housing, housekeeping, etc)

– Funeral cost, if …

– Alimony to family members (spouse, children, etc)

– Legal fees (lawyers, court, …)

• Moral damages

– Pain & suffering of the injured, incl. compensation for potential disfigurement

– Non-material compensation paid to relatives

Heads of damageMTPL

15


Case study Poland

16


Tetraplegia Claim Scenario - Poland

17

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

Loss of Earnings Assistance Pain and Suffering Remainder

2000: +530%

2010: +1699%

2015: +2265%

2025: +3659%

Development from1990 to:


Poland

Scenario: Compensation for Paraplegic case;man, 30 years oldmarried, two childrenaverage wage income65% disability, third party assistance 8h/day


Polish Market Comparison

19

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1 2 3 4 5 6 7 8 9 10 11 12

Paraplegic Scenario

Average: €0,68m

StDev: €0,3m



20

0

200.000

400.000

600.000

800.000

1.000.000

1.200.000

1.400.000

1 2 3 4 5 6 7 8 9 10 11 12

Paraplegic Scenario - Details

Pain and suffering Hospital Costs Care costs Legal Costs Loss of earnings Others

Average: €0,68m

StDev: €0,3m


Poland

Scenario: Compensation for tetraplegic case (brain injury)child, 6 years olddisability 80%third party assistance 24h/day



0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

1 2 3 4 5 6 7 8 9 10 11 12

Tetraplegic Scenario - Detail

Pain and suffering Hospital Costs Care costs Legal Costs Loss of earnings Others

Average: €1,5m

StDev: €0,6m


Peer ComparisonFrance

23


French Market Comparison

Average: €2,8mStDev: €0,5m


First glance – Romania, Bulgaria & Slovenia

25


Bodily Injury Landscape – Romania, Bulgaria & SloveniaA first glance

26

-

100.000

200.000

300.000

400.000

1 2 3 4 5 6 7 8 9 10 11 12

Romania Tetraplegic - Pain & Suffering

Pain and suffering given range

Average: €130kStDev: €97k

Publishedmid 2017

0%

50%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Bulgaria – cases going to court


Inflation & Yields

27


Inflation is historically low, except in Russia – but inflation has been coming down there also

Consumer price inflation yoy in %

Sources: Datastream, Economic Research & Consulting


Interest rates in CEE have reached an all time low, tracking ECB policy, except for Russia

29

Sources: Datastream and Economic Research & Consulting

Interest rates


100,0%99,2% 98,7% 98,2%

96,7%97,5%

96,4%95,2%

94,4% 94,2%

90,0%91,2%

92,9% 93,1%

80,0%

82,0%

84,0%

86,0%

88,0%

90,0%

92,0%

94,0%

96,0%

98,0%

100,0%

Primary MTPL ClaimDiscounted ultimate losses with EU yields

30

2004-2010: -2%

2004-2015: -6%

Discount impact:


Reinsurance MTPL XoL ClaimDiscounted ultimate losses with EU yields

31

100,0%

75,9%

68,3%

61,2%

49,2%54,7%

49,4%

43,2%38,8%

44,6%

34,4%39,9%

43,8%

38,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

2004-2010: -12%

2004-2015: -50%

Discount impact:


Reserving & Actuarial view


Selected Scenarios and Impacts

Inflation …3% pa additional inflation on top of expected for three years. Impact before settlement (lump sum and annuity are exposed similarly) .

Potential Impact on ultimate

… creates gradual impacts • scenarios related to life expectancy will happen

gradually • they will affect single portfolios or countries rather

than regions

Life expectancy…mismatch relative to what was expected (eg life expectancy or life impairment mismatch)

… creates the biggest impact • inflation scenarios will be relatively short in time• they will affect both lump sum and annuities• they will affect regions rather than single countries

Discount rate shifts … decrease of discount rate by 1%.

... create regional impacts •Discount rate shifts can impact countries/regions• UK: shift in discount rate may affect PPO take up ratio• Germany: social security system gets more $ from the

insurer (recourse component which is lump sum)

Scenario

Legal changes… change of compensation framework lump sum vs annuity regime

... bring retroactive impact • UK: higher PPO propensity• Spain: new Baremo law• Czech rep.: new Civil Code

Annuities Lump Sum

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time

Impa

ct

Time


Swiss Re Reserving Approach:Hybrid L&H and P&C approach

Ultim

ate Losses

Standard P&C methods

P&Ctail assumptions

Observationperiod L&H Tail factor is based on a

special simulations tool and/or based on risk factors, mainly: - Inflation- Discount rate shifts- Life expectancy- Mortality Tables- ….

L&H method

L&Htail assumptions


Motor is an important line for all of us

it bares challenges

we need to anticipate changes – to be able to pay claims as an insurer and reinsurer



Insurer

ReinsurerMotor Insurance

MTPL ClaimGre

enC

ard

Bod

ily In

jury

Long

evit

y

Claims Heads

Yield Curve

InflationDiscount

Loss

Tetr

aple

gic

Paraplegic

Loss of earnings

Care Cost

P&S

Assistance

Case Reserves

Model

Peer Comparison

Actuarial

Life

exp

ecta

ncy

Legal changes

Res

ervi

ng

IBNR

Acc

iden

t

Inju

ry

Development

Tail

Cos

t

Cha

lleng

e

Euro

pe

Study

Outlook

Claims handling

Lawyer

Court

Fam

ily

Future



Legal notice

38

©2017 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re.

The information and opinions contained in the presentation are provided as at the date of the presentation and are subject to change without notice. Although the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage or loss resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial or consequential loss relating to this presentation.

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Motor Claims - A challenge for the industry · or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of